No weekend for traders as banks’ problems deepen

(Bloomberg) – Wake-up calls at 6am. Canceled tennis dates. Anxious check-ins to bond courses while walking the dog.

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These are just some of the scenes from traders and money managers over the weekend as the financial world braced for the next and perhaps final act of the stunning and spectacular Credit Suisse Group AG crash.

For a second straight weekend, traders around the world, from London to New York to São Paulo, were glued to their cell phones and laptops, checking the news, scheduling impromptu Zoom calls and awaiting marching orders – all on high alert for yet another banking crisis. Last time it was Silicon Valley Bank, a US regional bank for startups. This time it’s Credit Suisse, once a titan of the important Swiss banking industry.

Aside from OTC bond trading, most traders had little to do with closed markets as Swiss officials and UBS AG fought over a deal for all or parts of Credit Suisse on Saturday. Still, a faint sense of trepidation about “what’s next” was palpable for the broader banking industry – and the global economy – after markets reopened on Monday.

“The condition of Credit Suisse and US regional banks raises concerns about what we don’t know,” said Trevor Bateman, head of investment-grade credit research at CIBC Asset Management. “We spent time over the weekend looking at possible scenarios, outcomes and implications of these second and third order outcomes. And the unknown unknowns.”

Many were working from home, a now familiar Covid-era routine. Some still went to the office and organized conference calls. Goldman Sachs Group Inc. and Morgan Stanley were among the bond desks open over the weekend, according to people familiar with the matter. A Goldman representative declined to comment, while Morgan Stanley did not immediately respond to a request for comment from Bloomberg.

The story goes on

The Credit Suisse crisis nears its finale as UBS discussions heat up

Because bonds are traded over-the-counter, they can technically change hands at any time. But it is highly unusual for trading to take place over the weekend.

Nonetheless, there was unusual bond activity from both SVB and Credit Suisse. At least two Credit Suisse bond price quotes were sent out on Saturday, copies of which were seen on Bloomberg. Senior bonds were quoted higher by dealers, in some cases by 12 points. Since it’s the weekend, it’s unclear whether trading has taken place at these levels.

According to an investor who trades credit default swaps for a Swiss bank bondholder, the key question in any deal with Credit Suisse is figuring out how assets will be split and how that affects the company’s debt structure.

Like many others, he planned to stay home over the weekend and follow the news from his phone.

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“Everyone actively checks news,” said Michael Sandberg, equity derivatives sales trader at United First Partners. “Many of us receive calls from clients looking for opportunities as the situation at Credit Suisse develops.”

calm before storm

A money manager in Brussels, who requested anonymity because he was not authorized to speak publicly, said the last time he remembered a similar situation was after Russia invaded Ukraine, when market participants were unsure whether interest payments on bonds are possible are deleted.

In São Paulo, a credit dealer for a major bank said the weekend was like the calm before a tsunami, when the water has receded and the incoming wall of water is yet to collapse.

The dealer, who asked not to be named, did not come home at 2am on Friday and was woken up early on Saturday after a few hours of sleep. He worked from home in his gym clothes after abandoning plans to play tennis in the mornings. It’s been uninterrupted since Wednesday, he said, but the trader still plans to go into the office later on Saturday.

–With support from Giulia Morpurgo and Reshmi Basu.

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